The New French Wealth Regulations

The New French Wealth Regulations

Acquiring French Property Doesn't Have To Be Taxing

On the 1st of January 2018, the ‘impôt de solidarité sur la fortune’ usually ISF burst forth delivering a surge of extra interest into the French real estate and property market. For those seeking to relocate across the channel, President Macron's brainchild is quickly growing into a hugely popular move. It also means both French residents and ex-pats are celebrating that most prized monetary possession, 'the tax cut'.

What Does This Mean?

Currently, French residents whose global wealth exceeds €1.3 million will pay a percentage levy of up to 1.5 per cent. This law has resulted in more than 60,000 millionaires leaving the country since the turn of the century. Experts are predicting many will now return, given this will apply to worldwide property only. It also means investors looking for both French luxury homes and even those charismatic castles, have been presented with a wonderful opportunity to find their dream property free from massive penalties.

A Surge In Property Interest

In fact, agents are reporting inquiries for properties reaching their highest level for a decade because of the tax changes.  Paris, the Riviera, Angouleme-Bordeaux, The Dordogne, The Alps and Provence are all feeling the benefit in this sense. The market capital in particular will really benefit from the new regulations, given demand is currently bigger than supply.

This of course will slowly balance up as the year gets older, as the buyers market becomes much more competitive, as a result of the tax burden easing. And it's a trend set to continue with ex-pats benefiting, regardless of what sort of property they invest in. It's believed the newly introduced reform will cost the government €3.2 billion in tax revenue. The timing couldn't be better as most agents make an extra effort at this time of year to bring new properties to market, ready for that added Spring interest from potential investors.

2018 A Pivotal Tax Year In France

In reality this represents a clear reduction of the tax burden on non-property assets. But remember – if the value of any real estate assets and rights within France or worldwide exceeds €1.3 million, ex-pats will still have to pay the new tax.

In truth, recent French legislation has tended to result in higher taxation, so 2018 seems certain to be pivotal when it comes to taxation on accrued wealth. According to tax experts, by using mortgages cannily combined with any non-property investments, financial liabilities in France could all but be eliminated.

From the first of January mortgages could actually be offset, with house contents valued either at five per cent of total assets, or their real value. French authorities are expecting a 70 per cent drop in revenues because of this. And let's not forget France is the largest country in the European Union, and the world’s fifth-largest economy in terms of nominal GDP.

The Search For Castles And Luxury Homes

Of the total percentage of international property buyers, three per cent purchase castles – many more secure investments in luxury real estate. And of course, there are two very important things you must analyse carefully before beginning your castle or luxury property search. What's your realistic budget, and how might the property be used?

If you have no plans to live in your castle and don't want to carry out full renovations, but still retain a luxury home, you could rent out the property to help with maintenance costs. It's always a good idea to wait for a better exchange rate before making a bid on any property, because even if there's no reduction in the sale price, a good rate of exchange might still make things less expensive. With the Euro at the forefront, its performance in the next year will depend on its relationship with both sterling and the dollar. Being a member of the EU for the time being, will still see the UK  benefit from the effects of the new free trade agreements  attenuating the FX effect against sterling.

A Call To Action

With prices rising however and numbers of French property sales going up, putting off that long-held ambition of purchasing a dream home across the channel could be costly in the long run. But as always employ the services of a company carrying long term inside knowledge of the country, and with a solid reputation for excellent service. Good research is absolutely key.

This is all good news for British ex-pats as well as non-residents with French mortgages, as the year gathers pace. La vie du château awaits....